The disclosed subject matter relates to techniques for the matching of orders in connection with the trading of financial instruments.
In the trading of financial instruments, including, e.g., equities, bonds, options, futures, derivatives, or the like, parties may desire to trade large blocks of an instrument. Conventional market structures can make it difficult for a buy-side party (e.g., an investment manager) to trade a relatively large block of an instrument without providing details, such as the available size or price of an instrument, to other firms. For example, if a buy-side party wishes to execute a trade of a relatively large block of an instrument, the buy-side party could communicate its trading intention, e.g., with an indication of interest (“IOI”) messaging system, to a sell-side party without a guarantee that a trade would actually be executed. This provision of details to other firms, e.g., sell-side parties, can lead to information leakage, which can have market impact that may have a detrimental effect on the trading price of the financial instrument.
Conventionally, a sell-side party acts as an intermediary between two potential buy-side counterparties and facilitates the determination of an appropriate size (i.e., the number of shares) and price of a trade between the counterparties. The sell-side party can receive IOI messages from potential buy-side parties, and can balance potential buy-side parties' trade interests. When two parties have trade interests that generally align (i.e., one party wishes to sell a financial instrument and another party wishes to buy that financial instrument), the sell-side party can facilitate the discovery of appropriate trade size and price. This conventional process, however, requires that buy-side parties disclose information about their trading intentions, demand, price limits, block size, and the like. This information can impact the market for a financial instrument. For example, a buy-side party's intention to buy a large block of a financial instrument may signal an increased demand for that instrument, which may increase the price at which others are willing to sell the financial instrument. Similarly, leakage of information about a seller's intent to sell a large block of a given instrument could decrease the price that others would be willing to pay, thereby driving down the price before the full block has traded.
Accordingly, it is desirable to provide a method and system for matching orders with reduced opportunity for the dissemination of related to buy-side parties' trade intentions.